The Wall Street Journal yesterday had a great article on the debate between efficient market theorists and those who believe in more of a behavioral explanation for stock prices. Supposedly, Eugene Fama has slightly backed off his conclusion that markets are always efficient--he now says that sometimes they may not be completely efficient.

Fine. But the story didn't get to what really matters from this debate, what that means for investors. Even if markets aren't always 100% efficient, it does not logically follow that an individual investor can determine, at a given point in time, exactly how a market is not efficient. Money managers, who make a living on the fiction that they can consistently beat the market, will surely herald this shift in thought as good news for market timers and technical strategists.

The virtues of index investing are independent of whether the market is somewhat, mostly or completely efficient. Lots of irrational things drive stock prices, but detecting those is impossible. The best approach is still to assume you're not any smarter than the market and to ensure you come out with at least the same results as the market generally.